Starting a Nonprofit Organization

501 Commons
2011 Edition
 ABOUT 501 COMMONS

501 Commons is a nonprofit that provides consulting, facilitation, and management support
services to other community organizations, schools, and government offices in Washington
State.

We offer services, programs, and resources in each of the five elements of a healthy nonprofit:

 Governance and Board

 Management and Culture
 Program and Administrative
 Community and Relationships
 Fundraising and Financial Management

Services are provided by staff consultants and our network of 250+ Service Corps members,
skilled professionals who volunteer their time and expertise. Some Service Corps members have
experience as senior managers or executives in the business sector, and most have worked in the
nonprofit sector as professional consultants, executive directors, program managers, or board
leaders.

To learn more about 501 Commons and our work, visit us online at www.501commons.org

501 Commons does not endorse any publication or product listed within this guide, and sincerely
encourages potential nonprofits and organizers to contact a lawyer familiar with nonprofit law. We wish
you the best of luck in forming a nonprofit!

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 PREFACE

“GENEROSITY WITH WISDOM IS LIKE TWO WHEELS OF A CART.”

JAPANESE PROVERB

Many people consider forming a nonprofit because they see a problem that they believe they
could address. Or they have an idea about a product or a service that would benefit people or the
community. In this way, starting a nonprofit organization is just like starting a for-profit
business. You have to have a good product and there has to be a “market” or a need for that
product.

Read through this document so that you have a good idea of what is involved in starting a
nonprofit. This document contains numerous links to online resources. For printed reference
materials, we recommend The Nonprofit Handbook by Gary M. Grobman; Starting and Building
a Nonprofit: a practical guide by Peri H. Pakroo; and How to Form a Nonprofit Corporation by
Anthony Mancuso.

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 PART 1: IS YOUR IDEA A NONPROFIT OR A BUSINESS?

You need to determine if your idea is best executed through a for-profit business or a nonprofit
organization. Starting a nonprofit has all the requirements of starting a business plus additional
requirements, particularly if you want to be able to accept tax-deductible donations as a tax-
exempt organization (for a helpful comparison go to www.nonprofits.org/npofaq/18/82.html).

In a for-profit organization, the owners, or the people who represent the owners (for example, the
board of directors), can decide what they want to do with any net earnings or “profit” generated
by the business. Most for-profits are sole proprietorships, partnerships, limited liability
companies, or corporations.

Nonprofits can – and should – have a “profit” or a surplus of revenues over expenditures. They
should have some money left over each year to invest in improving the organization and in
protecting the organization in the face of unexpected costs. What makes nonprofits different
from for-profit corporations is that they cannot distribute their profit to the organization’s
members, directors, or officers. The IRS is increasing its oversight of nonprofits to prevent what
is called “private inurement,” which is prohibited in all nonprofits. Private inurement happens
when an insider — an individual who has significant influence over the organization — enters
into an arrangement with the nonprofit and receives benefits, such as a high salary, greater than
she or he provides in return.

A founder of a nonprofit organization must decide whether they are going to be the executive
director or a member of the board. Funders and volunteers may see organizations where leaders
who are in both roles as a personal crusade, rather than an independent nonprofit. Whether you
are the executive director or a member of the board you give up having control over the
organization, even if you founded it and provided initial funding. Boards hire and fire executive
directors and a board member must be prepared to share control with an executive director and
with other board members.

WHY FORM A NONPROFIT CORPORATION?

A group of people can get together to do something that benefits the community without forming
a nonprofit corporation. If you are not going to ask for or receive donations, collect any income

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for the service or product you offer, own property, have a bank account, or hire staff, you could
simply be an informal organization.

If the activities of your group require you to form a nonprofit corporation, these are some of the
advantages that may be available to your organization:

 An organization granted tax-exempt status (501(c) (3)) does not pay federal income tax
(usual business tax rates range from 17% to 34%).
 Many grants and charitable donations from individuals, foundations, corporations, and
the government are available only to nonprofit organizations.
 Donations made by individuals, foundations, and corporations to certain tax-exempt
nonprofits are tax-deductible.
 Forming a nonprofit organization can help insure that the organization continues to exist
in the future even if you are not personally involved.
 Forming a corporation can protect you personally from some types of liability for the
operations of the nonprofit.
 Nonprofits are eligible for reduced postage rates for bulk mailings.

In the State of Washington, nonprofit arts organizations are exempt from paying sales tax on
expenses directly related to programs, and may apply for an exemption from Seattle Admissions
Tax (5%).

Go to: http://www.idealist.org/if/i/en/faqcat/26-24 for more general information on nonprofit

corporations. Several companies provide web-based services that can help you with some of the
steps needed to establish a corporation. Go to www.form-a-corp.com or www.mycorporation.com or
www.bizfilings.com or www.corporate.com.

WHY NOT WORK WITH AN EXISTING NONPROFIT?

Before setting up a brand new nonprofit consider if there are established organizations within the
community that serve the same or a related purpose, or target the same population. Exploring
partnerships and consider piloting the program through another organization before beginning
any official paperwork. You may be able to advance your ideas much more quickly by working
through an existing organization. Most grant making organizations will not fund new nonprofits
that are seen as providing a service or addressing an issue that is already within the mission of
existing organizations. Even if you are able to attract start-up funding, it will likely be very

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difficult to replace that funding in the early years of the organization. The basic cost of starting a
new organization, if you have a small office and a part time staff person, is at least $45,000.

CONDUCT INTERVIEWS

Set up interviews with at least four organizations that have a similar or related purpose. Contact
potential donors, the people you want to serve, and community leaders in order to assess if your
mission can best be accomplished through an existing or a new organization.

If you find an existing organization with a purpose similar to the one you are seeking to
establish, consider joining the organization as a volunteer or ask if they would create a program
to carry out your ideas.

CONSIDER FINDING A FISCAL SPONSOR

You should also consider partnering with an existing organization before going through the
process of setting up a brand-new nonprofit. Such a partnership is called “fiscal sponsorship.” A
sponsoring organization oversees the financial affairs of the sponsored organization and provides
administrative support, as needed. Typically, a portion of the funds raised go to the fiscal sponsor
to offset their costs. This type of arrangement can reduce your administrative costs substantially
and give you access to professional management services. It can also give you credibility with
funders and potential donors. The activities you want to do need to fit within the mission and
purpose of the sponsoring organization.

To assess fiscal sponsorship go to:

 www.managementhelp.org/finance/np_fnce/np_fnce.htm

 A sample fiscal sponsorship agreement can be found at:

http://grantspace.org/Tools/Knowledge-Base/Individual-Grantseekers/Fiscal-
Sponsorship/Examples-of-fiscal-sponsorship-agreements

A leading fiscal sponsor is the Tides Center in California. For information on the types of
organizations that are eligible to become a project of the Tides Center and general information
on fiscal sponsorship go to http://www.tides.org/i-want-to/turn-my-vision-ideas-into-a-nonprofit-
project/start-a-nonprofit-project/faq-project/

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 RAISING FUNDS

Do not assume that you will get grants to start a nonprofit. Grants are very competitive and are
given to organizations that have a track record, including having raised funds from other sources.
Expect to have to raise all the funds you need for startup of the nonprofit and at least for the first
year of operations from contributions you make yourself and money given to you by individuals
you know or approach.

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 PART 2: WHAT KIND OF NONPROFIT?

If the organization needs to be a separate legal entity that can own property and have a bank
account, you will need to incorporate with the state of Washington.

STATE REGULATION

There are many types of nonprofits. The rules for each type of nonprofit are slightly (but
sometimes importantly) different. Washington State allows the creation of a nonprofit
corporation “for any lawful purpose.” It is important that you know all of the options for being a
nonprofit and chose the option that matches your organization’s activities. Contact the Secretary
of State’s Office for more information at 360-902-4151, PO Box 40220, Olympia, WA 98504 or
www.secstate.wa.gov.

FEDERAL/IRS REGULATION

In addition to state regulation of nonprofits, the IRS administers the federal tax regulations that
apply to nonprofits. The tax status of a nonprofit depends on how the IRS interprets the nature
of the organization and its services.

 Tax-exempt nonprofit – Most nonprofits that accept grants and donations from
individuals, businesses, and foundations are nonprofit corporations eligible for tax
exemption under the IRS. The Internal Revenue Service (IRS) gets involved because
corporations are, in general, required to pay federal corporate income taxes on their net
earnings. Before you file with the IRS to be a tax-exempt organization, you must be
incorporated.
 Probably the best known type of nonprofit is the IRS classification of 501(c) (3), a
“charitable nonprofit.” To view various kinds of tax-exempt (Section 501) organizations,
see www.irs.gov/publications/p557/ar01.html.
 To obtain information about Tax Exempt Status contact the Internal Revenue Service
directly at 1-877-829-5500 or visit their website at: www.irs.gov . Information on tax-
exempt nonprofit status is included in IRS Publication 557 at www.irs.gov/pub/irs-
pdf/p557.pdf.
 Tax-exempt nonprofits are able to accept tax-deductible contributions. Being tax-exempt
does not necessarily mean you are eligible to receive tax-deductible donations (donations
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 individuals and corporations can deduct from their income taxes). See IRS Publication
526, “Charitable Contributions,” at www.irs.gov/pub/irs-pdf/p526.pdf.

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 PART 3: THE LEGAL STEPS TO FORM A NONPROFIT

Washington Attorneys Assisting Community Organizations (WAACO) publishes the

“Washington Nonprofit Handbook.” You can download this helpful document at
http://www.sos.wa.gov/_assets/charities/Washington%20Nonprofit%20Handbook.pdf. The
handbook gives you detailed information on the steps to forming a nonprofit; these steps are
summarized below.

The following are the specific steps to be taken in order to establish a nonprofit organization that
meets legal requirements.

1. Develop a board of directors. The board must be a minimum of three people but should be
more, generally 7-12. You will need people with a broad array of skills in fundraising,
accounting, knowledge of your programs, community contacts etc.

The board should include people not related to the person who will be managing the
organization. Whenever possible, directors should not be relatives or close friends. Having
relatives or close friends on the board will make it more difficult to demonstrate that
decisions were made in an unbiased way and that no board member is personally benefiting
from the organization.

Resources about boards of directors include:

 www.standardsforexcellence.org
 CompassPoint’s Board Café at: www.boardcafe.org
 Board Source at: www.boardsource.org
 www.managementhelp.org/boards/boards.htm
 United Way of King County at: http://www.uwkc.org/partner-with-
us/nonprofits/governance/
 Information on the approach to board governance called policy governance can be
found at: www.carvergovernance.com

Develop a profile or list of characteristics you want in a person on your board of directors.
These characteristics may include certain kinds of expertise but it is a good idea to consider

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 personal characteristics such as how the person works within a group and their experience on
a board as well.

Also develop a list of commitments you want board members to make such as attending
board meetings, making a financial contribution to the board, participating on a board
committee, etc. Have each person who joins the board sign this commitment form.

2. Reserve the organization’s name. To avoid possible infringement on a reserved name, do a

thorough search on all business names you will use. In Washington State, check the
Business Search Line at 1-900-463-6000 (this will cost about $6.00) and the Trademark
Division of the Secretary of State at (360) 753-7120. Also contact the U.S. Patent &
Trademark Office at 1-800-786-9199 (www.uspto.gov). Contact the Secretary of State’s
Corporate Division at: www.secstate.wa.gov/corps. The fee is $20. More information can be
found at: http://www.dol.wa.gov/business/

3. Prepare and file the Articles of Incorporation. File two sets of Articles of Incorporation
with Washington State’s Secretary of State’s Corporate Division to gain incorporation status
at. The fee is $30. For nonprofit corporations, there is no annual corporate license renewal
fee, but there is an annual report fee of $10. The forms are at:
www.secstate.wa.gov/corps/registration_forms.aspx.

Requirements for Articles of Incorporation under the State Nonprofit Corporation Act are
available at http://apps.leg.wa.gov/RCW/default.aspx?cite=24.03.025. Sample articles of
incorporation and bylaws from Nonprofit Resources are available at:
http://www.nps.gov/partnerships/model_articles.htm

4. Apply for Federal Employer Identification Number (EIN); Form SS-4, from the IRS.
This number works like a Social Security Number for your organization. Instructions for
Form SS-4 and Form SS-4 are available at: www.irs.gov/formspubs/lists/0,,id=97817,00.html.

You can apply for an EIN through the website at

www.irs.gov/businesses/small/article/0,,id=102767,00.html or by mail to Internal Revenue
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 Service, ATTN: Entity Control, Holtsville NY 00501. Toll Free 1-877-829-5500, Fax 1-
513-263-3756.

5. Prepare organization’s bylaws. You will need to decide if you are going to be organized as
a membership organization or a non-membership organization. For guidance on the
difference please reference the Washington Nonprofit Handbook.

Other examples and information about writing bylaws are found at the following sites:

 Sample nonprofit bylaws: http://www.grantspace.org/Tools/Knowledge-

Base/Nonprofit-Management/Establishment/Nonprofit-bylaws
 Minnesota Council of Nonprofits: http://www.mncn.org/info/template_start.htm

6. Develop a business plan (see Part 4). This process will help you if you apply to the IRS for
tax-exempt status, and will be the basis for grant applications and fundraising solicitation.

7. Conduct an initial meeting of the board of directors. Prepare an agenda in advance of the
meeting so that the organization is clear about what it needs to accomplish in the meeting.

8. Apply for nonprofit designation from the IRS. If your organization is likely to qualify,
apply for tax-exempt status at the IRS at: www.irs.gov by completing all the paperwork of
application form “Publication 557.” Include the processing fee of $150, and return all
paperwork to the IRS. Remember: If you expect to collect donations that are tax-deductible
you need to get IRS approval as both a tax-exempt organizations and as an organization able
to accept tax-deductible contributions. Nonprofit organizations file for 501 C (3) tax-
exemption status using Form 1023 at: http://www.irs.gov/pub/irs-pdf/f1023.pdf
9. Obtain needed state licenses: The state has a “Master Application” that is used to apply for
a state Unified Business Identifier (UBI) number as well as many state licenses. It is also
used to register Trade Names (Doing Business As names). Before completing an application,
you may want to view business license information and view or print out the License Fee
Sheet at: http://www.dol.wa.gov/business/UCC/uccpaperfees.html to help you determine the

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 fees and forms required for your business. Applications and online instructions are also
available at this site.

You may also contact the state directly if you have regulatory questions: Washington State
Secretary of State, 801 Capitol Way S, PO Box 40234, Olympia WA 98504-0234, 360-753-
7120 or toll free Washington State only-1-800-332-4483. You can also visit:
www.secstate.wa.gov/

10. Register with the State Charitable Solicitations Program and/or Charitable Trust
Program. Registration is not required for all nonprofits. To determine if your organization
meets registration requirements, visit http://secstate.wa.gov/charities/ and click on the
“Charities” and “Trust” tabs. Generally, any organization that conducts charitable
solicitations in Washington State must register under the Charitable Solicitations Act, but
there are some exceptions for political organizations and churches. Contact the Charities
Program directly for more information regarding exemptions. Exempt organizations are
encouraged to file an Optional Statement for an Exempt Organization. The filing fee for a
new registration is $20; renewals are $10.

The Charitable Trust registration is separate from the Charitable Solicitations registration.
Any organization that is domiciled in Washington State, has a charitable purpose, and holds
$250,000 or more in assets is required to file a Charitable Trust registration. Some
organizations that do not meet the filing requirement choose to file in order to be included in
the Charitable Trust Directory, an annual publication that lists grantmaking and grantseeking
organizations in Washington State. Information on filing requirements is available at the
Secretary of State website listed above, or by calling 1-800-332-GIVE. The filing fee for a
new registration is $25; renewals are also $25.

11. Obtain a business license from the city in which you are doing business. The City of
Seattle requires all businesses located within the city limits, or who conduct business within
the city limits, to be licensed with the city. For the City of Seattle go to:
www.pan.ci.seattle.wa.us. The online application form for the City of Seattle can be found at:
www.cityofseattle.net/rca/licenses/Blicform.htm.

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 Certain business licenses may require approval through city police, planning, fire and
building departments. Call the Seattle Department of Executive Administration at 206-684-
8484. A directory of city departments is at: www.cityofseattle.net/directory/.

Address information: Seattle (King County) WA, Executive Administration, Revenue &
Consumer Affairs, 700 Fifth Ave, Ste 4250 Seattle, WA 98104-5020 USA, Phone: 206-684-
8484, Fax: 206-684-5170

12. Meet county licensing requirements. Contact the county(s) you plan to do business in to
get information on any county license requirements.

For King County, licensing with the cities you do business in is sufficient, unless you will
also be doing business in unincorporated King County as well. Address information:
King County Business License Office, 900 Oakesdale Avenue SW, Renton, WA 98055-
1219. Phone: 206-296-6600. Or go to: http://www.kingcounty.gov/business/licenses.aspx

For Pierce County, go to: http://www.co.pierce.wa.us/index.aspx?NID=355

For Snohomish County: www.co.snohomish.wa.us/index.htm

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 PART 4: DEVELOPING A BUSINESS PLAN

“THE FELLOW THAT CAN ONLY SEE A WEEK AHEAD IS ALWAYS

THE POPULAR FELLOW, FOR HE IS LOOKING WITH THE CROWD.

BUT THE ONE THAT CAN SEE YEARS AHEAD, HE HAS A

TELESCOPE, BUT HE CANNOT MAKE ANYONE BELIEVE HE HAS

IT.”

MARK TWAIN, AUTOBIOGRAPHY. (1949)

In order to give the board, staff and volunteers of the organization a road map for building a
successful organization, you should develop a business plan for the new organization.

Having a concise business plan will help you respond to questions from the State and the IRS.
Also, a clear business plan becomes an introductory document to distribute to community
leaders, potential board members, staff, and partners in the venture. There are many books and
software programs published that offer ‘how-to’ information for developing a business plan;
some library or online research will lead you to choices that work for your organization.

A template for a nonprofit business plan is included as Attachment A.

Some additional resources on business planning, including some samples, are located at:

 www.mapnp.org/library/plan_dec/bus_plan/bus_plan.htm
 The Community Technology Centers website offers an excellent step-by-step process for
developing a nonprofit business plan: www.ctcnet.org/resources/toc.htm
 A sample for-profit plan can be found at:
www.bulletproofbizplans.com/bpsample/Sample_Plan/sample_plan1.html

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 FOUR BASIC STEPS TO DEVELOPING A BUSINESS PLAN

1. Document the need for the organization – You need to document the need for your
organization by describing the problem you intend to address or the need for the service
or product you will provide. Documentation can be from quantitative sources such as
census information, government reports, statistical studies, or research. It can also come
from qualitative sources such as informal community surveys, discussion groups, and
interviews with community leaders or experts on the issue. If you are going to provide a
service or product to individuals it is a good idea to survey, conduct focus groups, or
meet with potential users of your service to determine their interest and needs.
2. Develop a mission statement—The mission statement explains why the organization
exists. It provides a direction and focus for the organization’s employees, board, and
volunteers.
 What is the problem or need your organization is addressing?
 How is your organization different than other similar organizations?
 Who benefits from your work?

In no more than a few sentences a mission statement needs to communicate the essence
of your organization to your stakeholders and to the public. The mission statement
should focus on particular goals the organization would like to achieve, and can provide
momentum for activities within the organization. It is a good idea to involve the board of
directors in the development of the mission statement.

3. Describe the Program—Develop a detailed description of the program, including a

projected budget for operating the program. The budget should include all the typical
costs of doing business such as taxes, insurance, financial services, phone/internet and
supplies, as well as facility and personnel costs.
4. Develop a Financial Plan—A feasibility study should be conducted to gauge the
likelihood of success for the program. Write down all your assumptions about how many
people will access the program, how long it will take to be operational, and what the staff
and operation costs will be. Also record your assumptions about the environment in
which your program is working; consider other organizations that provide a similar
program or service, economic trends, and the number of people in your target
population/audience.

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 Develop a budget for startup and the first year of operations. Be sure to include business
expenses like insurance, taxes, payroll and professional services. Set services based on
comparisons with similar nonprofit organizations rather than private sector businesses.
Include specific funding sources you are targeting for support, estimate the range of support
that you expect from each source, and evaluate the viability of the organization if you receive
the low end of that estimate. Validate your assumptions by researching the giving histories of
the individuals and organizations you will be asking for funds. Plan to raise all of the funds
you need for startup without any grant support. Once you have raised some money from
individuals you can begin to apply selectively for grants. Assume that a new organization
will be much less likely to receive support than an organization that has existed for some
time.

Additional elements and a format for a business plan are shown in Attachment A.

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 PART 5: NONPROFIT MANAGEMENT OBLIGATIO NS

“THE THINGS WE FEAR MOST IN ORGANIZATIONS—

FLUCTUATIONS AND CHANGE—NEED NOT DISTURB US.

INSTEAD, FLUCTUATIONS ARE THE PRIMARY SOURCE OF

CREATIVITY AND CLEVERNESS.”

MARGARET WHEATLEY, LEADERSHIP AND THE NEW SCIENCE.

Tax-exempt nonprofit organizations can, and do, operate in most ways like any business. They
have bank accounts, own productive assets of all kinds, receive income from sales and other
forms of activity, make and hold passive investments, employ staff, enter into contracts of all
sorts, etc. Nonprofits must follow sound business practices in all these activities.

Nonprofit organizations have additional obligations that for profit companies or sole
proprietorships do not. There are specialized tax rules and accounting practices that apply to
nonprofit organizations. If the organization is of a certain size, the organization must disclose
the IRS form 990 to the general public, state regulators, and watchdog agencies. The IRS form
990 includes any salaries paid to officers or directors and the five highest-paid employees, and
contracts over $50,000 in the tax year. The form also requires the organization to divide its
expenses into "functional categories"—such as programs, administration, and fund-raising—and
to report the total expenditure for each category along with the amounts expended on each
program activity.

PAYING BUSINESS TAXES

Federal taxes: Call the Internal Revenue Service at 1-800-829-3676 to order a business tax kit.
Federal taxes may be paid by electronic transfer. In some cases, payment through electronic
transfer is mandatory. Enrollment forms are available by calling either 1-800-555-4477 or 1-
800-945-8400. You may also file some of your federal tax returns electronically. Contact the
IRS at 1-800-829-1040 to obtain information on electronic filing.

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Municipal business taxes: Washington cities tax private businesses, municipal, and private
utility companies within their boundaries. Contact each city in which business will be
conducted.

Property and personal property tax: You must report your business property, furniture,
equipment, supplies, etc., to the assessor of the county in which your business is located. King
County Assessor (206-296-7300): http://www.kingcounty.gov/Assessor.aspx

HIRING AND MANAGING EMPLOYEES

Some general information on the requirements for employees can be found at:
http://www.lni.wa.gov/workplacerights/

State: Report all newly hired and rehired employees to the Division of Child Support (DCS):
Department of Social and Health Services 1-800-562-0479; New Hire Reporting -
www.dshs.wa.gov/newhire

Federal: You must also complete a Federal I-9 form for every employee and submit it to:
Immigration and Naturalization Services 815 Airport Way S. Seattle WA 98134 (206) 553-
5956 1-800-870-3676

Resources for Recruiting Employees

There are several ways to advertise a nonprofit position for free but you will want to use one of
the larger paid services if you are trying to recruit nationally.

 Idealist.org offers a nonprofit job listing service: www.idealist.org

 Philanthropy Northwest also maintains a job bank:
https://services.philanthropynw.org/jobbank/
 Northwest Development Officers’ Association provides a job posting service at:
www.ndoa.org
 Exec Searches is a nationwide posting service for nonprofits: www.execsearches.com
 Opportunity Knocks http://www.opportunitynocs.org/
 The first three job postings are free at:
http://www.thenonprofitnetwork.org/index.php?page=en_Home

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  The first posting for nonmembers is free at the Society for Nonprofit Organizations:
http://www.snpo.org/nonprofitcareers/index.php
 Join the Nonprofit Networking group on Yahoo Groups. You can list jobs and ask
questions of the nonprofit community. This is primarily a local group.

Also consider four year and community colleges, especially those with nonprofit curriculum.
Many of these have periodic on campus job fairs, as well as publishing jobs on their sites:

 Bellevue College: www.bcc.ctc.edu/careers

 Seattle University: www.seattleu.edu/student/cdc
 University of Washington: http://careers.washington.edu/

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 ONLINE RESOURCES

“THAT IS WHAT I CONSIDER TRUE GENEROSITY: YOU GIVE

YOUR ALL AND YET YOU ALWAYS FEEL AS IF IT COSTS YOU

NOTHING.”

SIMONE DE BEAUVOIR, ALL MEN ARE MORTAL.

MANAGEMENT INFORMATION AND GENERAL RESOURCES

 Leader to Leader Institute (formerly the Drucker Foundation):

www.leadertoleader.org

 Center for Philanthropy and Nonprofit Leadership: www.npgoodpractice.org

 Free Management Library: www.managementhelp.org
 Minnesota Council of Nonprofits Information Center contains extensive
information on governance: www.mncn.org
 CompassPoint is noted for quality of its research and information on best
practices: www.compasspoint.org
 This site focuses on strengthening leadership and fostering inclusiveness and
collaborations: www.allianceonline.org

 Nancy Bell Evans Center - Management resources:

http://tools.evans.washington.edu/research/nbec/web-resources.php

 Capaciteria.org: http://capaciteria.org/

DEVELOPMENT RESOURCES

 Northwest Development Officers Association: www.ndoa.org

 Overview of nonprofit fundraising:
http://www.managementhelp.org/fndrsng/np_raise/fndraise.htm#anchor258174

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 NONPROFIT ORGANIZATION DIRECTORIES

 Idealist.org – Leading site for nonprofits. Includes job listings, volunteers and
consultants: www.idealist.org
 Guidestar.com – Make sure your organization is listed, and get info about
potential partners: www.guidestar.com
 Artist Trust - Artist Trust provides information on resources related to artists and
arts organizations: http://www.artisttrust.org/

GOVERNANCE AND BOARDS OF DIRECTORS

 BoardSource (formerly The National Center for Nonprofit Boards):

www.boardsource.org
 United Way of King County: http://www.uwkc.org/partner-with-us/nonprofits/governance/
 The Nonprofit Center: www.nonprofitcenter.com/
 Nonprofit Good Practice Guide: www.npgoodpractice.org

GRANTS AND FUNDRAISING

 For grant information go to the Foundation Center at www.foundationcenter.org.

They also have online library of resources for grantseekers and can direct you to
books and articles that may be helpful: lnps.fdncenter.org
 Contains latest national data on giving and volunteering: www.independentsector.org
 They are building a resource center with information for starting, running and
funding an organization: www.npgoodpractice.org

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 LOCAL LIBRARIES

 King County Library System Nonprofit & Philanthropy Resources Center:

www.kcls.org/philanthropy/

FINANCIAL MANAGEMENT

 501 Commons provides bookkeeping, payroll, and tax services, as well as custom
financial management consulting, in King and Snohomish Counties:
www.501commons.org

 The Nonprofit Center offers bookkeeping, payroll, and tax services in Pierce
County: www.npcenter.org
 Washington Association of Accountants: www.waa.org
 Accounting: http://www.paperglyphs.com/nporegulation/accounting.html

 Management Help: http://www.managementhelp.org/finance/np_fnce/np_fnce.htm

 Nonprofit Resource Center: http://www.1800net.com/nprc/index.html

 MAP for Nonprofits: www.mapnp.org/library/finance/np_fnce/np_fnce.htm

LEGAL SERVICES

 Directory of pro bono legal services:

www.abanet.org/legalservices/probono/directory.html
 A lawyer referral service is available through the King County Bar Association
(206-267-7100): http://www.kcba.org/lrs/index.aspx

 Washington Attorneys Assisting Community Organizations: www.waaco.org

 Washington Lawyers for the Arts: www.wa-artlaw.org

VOLUNTEERS

 A wonderful site covering every aspect of volunteer management:

www.serviceleader.org

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  People can find volunteer opportunities all over the country by zip code or area
of interest: www.volunteermatch.org

 Volunteer Centers of Washington State: http://www.volunteerwashington.org/

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 CHECKLIST FOR STARTING A NONPROFIT

1. DECIDING TO START A NONPROFIT

 Why not a business?

Understand the difference between a business and a nonprofit

 Why not an informal organization?

Understand the advantages/disadvantages of a nonprofit
(ref: http://www.nolo.com/article.cfm/objectID/F63DD4C1-456C-418F-
A1066A3F3FBE05A5/111/262/ART/)

 Why not work with an existing nonprofit?

Have researched and interviewed existing non-profits and potential clients/members/users

 What kind of nonprofit?

Have studied options
(ref: http://www.irs.gov/pub/irs-pdf/p557.pdf)

2. LEGAL STEPS

 Develop a board of directors (minimum of 3, usually 7-13)

 Develop a profile of the skills, experience and characteristics you want

 Develop a list of commitments you are asking of board members

 Decide the organization’s name

 Confirm the name is not reserved

 Reserve the name for a short period
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 (ref: http://www.nolo.com/article.cfm/pg/1/objectId/613C546C-746D-4161-
B3D6053876E3D4EC/catId/7037786D-4688-4C4E-
947C609C7CCFE81A/111/228/195/ART/)

 Prepare and filed the Articles of Incorporation Articles of Incorporation

 Apply for Federal Employer Identification Number (EIN)

Form SS-4: http://www.irs.gov/pub/irs-pdf/fss4.pdf
instruction: www.irs.gov/pub/irs-pdf/iss4.pdf

 Prepare organization’s bylaws

Bylaws (ref: http://www.nonprofitlaw.com/bylaws.htm)

 Develop a business plan (see below)

 Conduct an initial meeting of the board of directors

 Apply for nonprofit designation from the IRS

Form 1023: http://www.irs.gov/pub/irs-pdf/f1023.pdf
Instruction: http://www.irs.gov/pub/irs-pdf/i1023.pdf

 Obtain needed local licenses

 Obtain State licenses (follow this instruction)

 Meet county licensing requirements

 Obtain a business license from the city (refer to the website of each city)

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 ORGANIZATION NAME

Operating (or Business) Plan

Date

Prepared by

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 TABLE OF CONTENTS

Section 1: Background .................................................. Error! Bookmark not defined.

A. Background ............................................................... Error! Bookmark not defined.

B. Mission ....................................................................... Error! Bookmark not defined.

C. Vision ......................................................................... Error! Bookmark not defined.

Section 2: Organizational Strategy ............................. Error! Bookmark not defined.

A. Description of your organizational strategy ........ Error! Bookmark not defined.

B. Key strategies ............................................................ Error! Bookmark not defined.

Strategy 1 .................................................................. Error! Bookmark not defined.

Strategy 2…. ............................................................. Error! Bookmark not defined.

Strategy 3…. ............................................................. Error! Bookmark not defined.

Section 3: Governance .................................................. Error! Bookmark not defined.

A. Board of Directors .................................................... Error! Bookmark not defined.

B. Board Policies ............................................................ Error! Bookmark not defined.

Conflict of interest Policy ....................................... Error! Bookmark not defined.

Record Retention Policy ......................................... Error! Bookmark not defined.

Whistleblower Policy .............................................. Error! Bookmark not defined.

How ED salary will be established ....................... Error! Bookmark not defined.

Section 4: Operating Plan ............................................. Error! Bookmark not defined.

A. Description of the program(s) ................................ Error! Bookmark not defined.

B. Multi-year Staffing Plan .......................................... Error! Bookmark not defined.

C. Budget: Estimating Start-up and Operating CostsError! Bookmark not defined.

501 Commons © 2011 28

 Part 1: Year 1 Salaries ............................................. Error! Bookmark not defined.

Part 2: Startup Capital Costs.................................. Error! Bookmark not defined.

Part 3: One Time Costs ........................................... Error! Bookmark not defined.

Part 4: Estimated Monthly Expenses .................... Error! Bookmark not defined.

Part 5: Summary Costs ........................................... Error! Bookmark not defined.

Section 5: Fundraising Plan ......................................... Error! Bookmark not defined.

Section 6: Action Plan for 1-2 years ............................ Error! Bookmark not defined.

Note: Update this hyperlinked table of contents by right clicking on update field and
choosing “update entire table.”

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 Section 1: BACKGROUND

Purpose of this section: Describe what the organization is being formed to do.

A. BACKGROUND

Problem the organization has been created to address

The cause of the problem

Current situation concerning the problem

B. MISSION

What the organization will do to address the problem

What evidence do you have that this is not already being done or is not available to the
people you expect to serve?

C. VISION

What the client/community/world will look like if we are successful

SECTION 2: ORGANIZATIONAL STRATEGY

Purpose of this section: Define your “theory of change”. How will what you do bring
about a solution to the problem?

A. DESCRIPTION OF YOUR ORGANIZATIONAL STRATEGY

Describe how what you will do will address the problem(s) your organization is being
formed to address. Your organization’s strategies should explain the specific activities
that will be carried out.
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 B. KEY STRATEGIES

Not more than 3

STRATEGY 1

Brief description
What will be done to address the problem? When will this be done?
What is the goal of the activity?

STRATEGY 2….

STRATEGY 3….

HOW WILL YOU KNOW IF YOU ARE BEING SUCCESSFUL?

Describe the outcomes you expect to generate. Specifically, how will you
measure results and what change do you expect to occur?

GOVERNANCE

Purpose of t his secti on – what will the organization do to realize the

organizational strat egy.

A. BOARD OF DIRECTORS

Must have at least 4 board members, i ncluding t hree not related to the

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founder. Insert names, addresses and tit les of board members. List the name
of the president , vice -president, secretary and treasurer. Describe what types
of board members will be recruited.

Name, addresses, titles Position

1. President

2. Vice President

3. Secretary

4. Treasurer

5.

6.

7.

8.

9.

10.

B. BOARD POLICIES

Conflict of interest Policy

Record Retention Policy
Whistleblower Policy
How ED salary will be established

SECTION 4: OPERATING PLAN

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 A. DESCRIPTON OF THE PROGRAM

B. MULTI-YEAR STAFFING PLAN

Note: a 1.0 Full-time Equivalent (FTE) is a person who works 40 hours a week or 2080
hours a year. A .5 FTE is a half-time or 20/hr. per week position.

Year 1 Year 2 Year 3

Position 1 2 3 4 1 2 3 4 1 2 3 4

Title1 .5 .5 .5 .5

C. BUDGET: ESTIMATING START-UP AND OPERATING COSTS

Part 1: Year 1 Salaries

Position Salary % FTE Benefits Total

(10-15%)

Exec. Dir 45k x .5 = 27,500 .5 2750 30,250

Part 1 Total

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 PART 2: STARTUP CAPITAL COSTS

Determine what furniture, vehicles or equipment you will need. Items needed:
furniture, fixtures and equipment, file cabinets, copy machine, computers etc. If items
are financed include them under monthly costs below.

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 Multi-Year Capital Costs Year 1 Year 2 Year 3

Vehicles

Computers

Furniture

Equipment

Total

Year 1 Capital Cost No. Price Per Total

1.
2.
3.
4.
Part 2 Total

PART 3: ONE TIME COSTS

One Time Costs Amount

Remodeling
Installation of fixtures and equipment
Personnel recruitment
Deposits with public utilities, telephone, intranet
Legal and other professional fees
Licenses and permits
Other cash requirements
Part 3 Total

Total One Time Start Up costs (Part 1-3) = ___________

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 PART 4: ESTIMATED MONTHLY EXPENSES

Monthly Expenses Total

Salaries
Benefits
Payroll taxes and expense
Rent or lease
Supplies
Advertising/communications
Telephone/ internet
Utilities
Insurance
Property taxes
Interest expense
Repairs and maintenance
Legal and accounting
Payments for capital equipment and furnishings
Website
Miscellaneous
TOTAL ESTIMATED MONTHLY EXPENSES
Multiply by 12= Annual cost

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 PART 5: SUMMARY OF COSTS

Summary of Costs Total

One time capital costs
First year operating costs
Total first year cost

SECTION 5: FUNDRAISING PLAN

How much from which sources? Plan to raise initial money from individuals, not
grants. For each source of revenue apply a discount percentage to recognize that not all
fundraising requests will be successful. For example: if $100,000 in grants are written,
assume that you will get 10% or $10,000 in revenue since most grants are not funded.

Sources Requests Discount % Est.

Revenue

Memberships

Corporate sponsorships

Grants (corporate and private

foundations)

Individual donors (how many at what

level)

TOTAL

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 SECTION 6: ACTION PLAN FOR 1-2 YEARS

Action Who is Due Date

accountable

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